Mortgage Charges Are Their Lowest in Months. Will They Keep This Approach?
The average interest rate on a 30-year fixed-rate mortgage fell to 2.90% in the week ending July 8, its lowest level since mid-February.
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As government bond yields have fallen, mortgage rates have also fallen. However, don’t expect prices to stay this low, experts advise.
The average rate on a 30-year fixed-rate mortgage fell to 2.90% in the week ending July 8, its lowest level since mid-February, according to Freddie Mac’s primary mortgage market survey published Thursday. The rate is eight basis points lower than the week before and the lowest since the week ended February 18 (one hundred basis points is one percentage point).
The fall in interest rates was accompanied by strong movements in the Treasuries market. The yield on 10-year government bonds, with which mortgage rates are often correlated, has been falling since mid-May and has accelerated since early July. The decline could be related to concerns about future economic growth, Barron’s previously reported.
Despite the recent fall in mortgage rates, economists expect rates to rise by the end of the year. Freddie Mac chief economist Sam Khater said Thursday he expected economic growth to drive interest rates higher. Freddie Mac’s latest quarterly forecast, released in April, predicts year-end interest rates on the 30-year fixed-rate mortgage averaging 3.4%.
Joel Kan, vice president of economic and industry forecasting for the Mortgage Bankers Association, said weekly mortgage rates can be volatile and trends in the recent numbers will be difficult to pinpoint. The trading group expects the average 30-year fixed-rate mortgage rate to end the year at 3.5% – a rate Kan described as historically low.
Keith Gumbinger, vice president of mortgage website HSH.com, said mortgage rates could continue to fall in the immediate future, “but the fundamentals that support higher rates remain.”
Fluctuations in the treasuries market aren’t the only force affecting mortgage rates, Freddie Macs Khater said. “While mortgage rates tend to closely follow government bond yields, other factors may have an impact, such as labor markets, which are continuing to improve, according to last week’s job report,” the chief economist said in the press release.
Home buyers and refinance borrowers still have time to take advantage of the low interest rates, noted Khater. He expects 30 year interest rates to hover around 3% before gradually rising higher.
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